Another reason Islam poses such problems for students of modern politics has to do with the conviction once widespread among Western political theorists that religion is, at best, a declining historical force, destined to give way to the twin forces of economic modernization and nation-state formation. One of the more remarkable facts of late-nineteenth- and twentieth-century Western political theory was the near universality of this belief. On the left and on the right, among Marxists and Weberians, and among modernization theorists and their postmodern critics, the view that modernity is inherently secularizing—or, at the very least, so thoroughly destabilizing of religious certitudes as to demand the privatization of religion within a realm of personal belief—has dominated all the important schools of modern Western social thought.

Outside of Marxism, which had its own version, the most sustained expression of the secularization thesis was associated with the modernization theory of the 1950s and 1960s. Drawing on the works of Emile Durkheim and Max Weber, modernization theory asserted that modern political-economic development involves, above all else, the increasing differentiation and specialization of social and economic structures. Commerce and, later, industrialization bring about a growing division of labor, and this in turn promotes the differentiation of society into the pluralistic entities characteristic of much of the world today. It is the cultural consequence of this change that is the primary concern of secularization theorists. Where previously there was a "sacred canopy" stabilizing life experience and providing shared meanings, in modern times the canopy is rent and the collective bases of morality and identity are diminished or destroyed.

Given the severity of its forecasts, it is not surprising that from early on observers began to express doubts regarding the relevance of secularization theory for the Muslim world. Some theorists, such as the Turkish-born sociologist Bassam Tibi, continued to insist that secularization is intrinsic to modernization, and the Islamic world is no exception. How then to explain the Islamic revival occurring in the Muslim world today? Citing the experience of Christianity in Western Europe, Tibi notes that Protestantism, too, once had grandiose political aspirations, but it was eventually "domiciled within the sphere of interiority." Islam, he predicts, will develop in a "parallel direction" because this is what modern development requires. It would seem that only inasmuch as the Islamic world is commandeered by antimodernizing reactionaries can it evade this privatization. Other observers of the Muslim world, however, appeared less certain of this prognosis. In his Islam Observed (a work that still shows the influence of his earlier training in modernization theory, which he subsequently rejected), Clifford Geertz argued that the "secularization of thought" is characteristic of the modern world. He attributed this trend to the "growth of science" and its destabilizing influence on revealed truths. Geertz qualified this generalization, however, by noting that "the loss of power of classical religious symbols to sustain a properly religious faith" can provoke the "ideologization of religion," as the bearers of revealed truths mobilize against secularist assault. While thus embracing a variant of the secularization thesis, Geertz recognized the possibility of antisecularizing movements. Contrary to what he might argue today, however, he also implied that these were by their very nature countermodernizations, rather than alternative modernities.

Some observers, such as the philosopher and anthropologist Ernest Gellner, have been even more adamant in rejecting the relevance of the secularization thesis for the Muslim world. Unlike Tibi or Geertz, Gellner attributes this exceptionalism not to Islam's antimodernizing dispositions, but to its uniqueness in adapting to the modern nation-state. The key, Gellner argues, is that Islam has been able to play a role in the nation-state functionally (but not substantively) equivalent to that of nationalism in the West. In the West, nineteenth- and early-twentieth-century nationalists revived and idealized popular ethnic culture, using it as an instrument of nation building. This change in political culture was facilitated by the social dislocation reshaping Europe, as the vertical allegiances of the feudal era were undermined and replaced by new lateral ones. Nationalism seized on the realities of vernacular language, folk customs, and myths of national origin to respond to this crisis and forge a new basis for the political order, one founded on the sovereignty of a "people" defined by common culture. In this manner, nationalism displaced Christianity as the key idiom of European political identity and, along the way, accelerated the secularization of modern European politics.

Gellner points out that a similar detraditionalization has altered social ties in the Muslim world. However, he argues that for several reasons Islam has been able to respond to the change while avoiding the secularist juggernaut.